As China eases huge economic stimulus initiative, PE, PP demand growth to fall in 2010-2012

Polyethylene (PE) and polypropylene (PP) demand growth in China is expected to drop dramatically this year through at least 2012 as a result of a slight easing in the country’s huge economic stimulus initiative, as estimated by ICIS. In its latest demand-growth estimates, Shanghai-based commodity information service CBI predicts that overall PE demand growth will decline to 8.6% in 2010 from 30.3% last year. Reduced liquidity resulting from a cutback in new bank lending, will contribute to a less ability by traders to speculate in polyolefins. A likely fall is expected in construction of residential property along with speculation in this area also, as the government cools the sector down. This will have direct and indirect effects on polyolefins demand. Steps have been taken by Bejing, short of interest-rate increases, to control overall inflation. The other big factor behind what is expected to be a steep drop in demand-growth percentage increases is that growth in 2009 was from a relatively low base as a result of the 2008 economic crisis.
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